Yes, I’m getting angry about this issue, and so should you!
After more than 10 years helping families navigate their college award letters, I have to ask: why are over a third of colleges and universities still hiding the real cost of attendance? As college students all over the country scrutinize financial aid award letters from schools that have accepted them, trying to compare costs, it soon becomes clear that the information in these letters is anything but clear, and may be outright misleading.
The Problem with Many Award Letters
Award letters can be misleading for multiple reasons. Most commonly, schools don’t state the actual cost of attendance in them. Indirect costs, like room and board or transportation and books, are routinely left out. Some financial aid offices also send out letters with confusing abbreviations to describe types of aid, abbreviations that other schools don’t use. Without an established, uniform model for evaluating college costs among schools – one that ensures all schools’ financial aid letters reflect the same comprehensive list of expenses – it’s easy to see how students and families may feel misled.
Even though there is, in fact, a standardized form that’s been developed by the U.S. Department of Education and the Consumer Financial Protection Bureau, schools are under no obligation to use it for any or all students. So some applicants may receive it while others don’t. Even though federal legislation was introduced in 2017 that would require standardization among schools’ financial aid award letters, it has not yet been passed, leaving students no better off than they’ve been.
How to Protect Your Student and Yourself
Our Client Service Director Jim Slowik has written for three years in a row about the problems to look for in your award letters. Unfortunately, his advice will still be applicable for the award letters students may be receiving this year. In essence, families will need to review their award letters very carefully, and not be afraid to ask questions to ensure a solid understanding of exactly what kind of financial aid is being offered and what expenses that aid is expected to cover.
In his most recent blog, Jim points out two main issues with colleges’ financial aid letters: missing and/or understated expenses, and confusing terminology.
For starters, while letters generally list a figure that estimates student expenses and outlines how loans or other aid awards, coupled with EFC (estimated family contribution) might cover students’ attendance, those expenses might not reflect the actual cost of attending a school. What looks like an affordable option might, in reality, saddle students with more debt than another school might have, where all expenses were laid out in the award letter, appearing at first glance to be more expensive.
In addition, some letters refer to grants, scholarships, and loans in terms that are confusing. They also don’t always reflect how those monies will be applied to the total cost of school, and what it means for students and their families’ EFC. The language used to list or describe a loan might make it sound like it’s reducing the cost of attendance but what it’s really doing is deferring the cost because students will be paying back that money later.
Some schools simply don’t make a distinction at all when presenting students with a financial aid package that includes grants and loans. Listed together and labeled “financial aid”, it’s easy to presume that all components of the package are funds that don’t need to be paid back. Also, schools don’t always include repayment terms for any loans that might be offered in the same set of paperwork as the financial aid package; it’s hard to agree to mortgage your future when you don’t know what the terms will be.
Is the College as Committed as Its Students?
In another blog, Jim pointed out that, surprisingly, award packages can change from year to year. While families might assume that, barring any change in their own financial situation, their EFC and financial aid package will remain fairly constant from year to year while the student is enrolled at a school, that’s no longer the case.
A practice known as front-loading, or what financial aid expert Mark Kantrowitz calls bait-and-switch, has become more common; that is, students get a robust aid package in year one, and then in later years, some merit aid isn’t renewed. It seems that some schools offer sweeter deals to accepted students in order to entice their commitment, then reducing aid with the assumption that students are already invested enough to stick around. One way Jim suggests that families can see if this applies to the schools their child is considering attending is to look at the school’s 4-year graduation rate. If a school’s aid packages to students drop off too much, students may be more likely to transfer, thus leading to a higher transfer rate.
Another key statistic is the school’s graduation rate. But read the fine print here – many schools now simply list a graduation rate, which is actually a 6-year rate, reflecting the increase in the national graduation rate from four years to six years. What seems financially feasible for four years might not be so for six years. In addition, ask schools about the renewal rate for merit scholarships beyond freshman year.
Don’t Expect Schools to Change
What’s more, it seems that colleges have no interest in complying with the suggested financial aid award letter guidelines issued by either the U.S. Department of Education or the Consumer Financial Protection Bureau, according to Jim. Since guidelines are in place, why aren’t schools adhering to them? There are two possible scenarios. One, revamping the existing system is prohibitively expensive, both in time and money. Two, because operating a school is a business: schools have expenses of their own to meet, and the way to do that is by having paying students. By keeping award letters unclear, perhaps more students are more likely to choose a given school because the financial aid package sounds better than it actually is.
Misleading award letters can be extremely frustrating for students and families, especially after all of the hard work students do to be admitted to schools of their choice. But by understanding how these letters are flawed and what families can do to best evaluate financial aid offers fairly, they may have the tools to overcome the challenge.